[Promising Industries & Stocks②] With Corona Consumer Stocks... Brand X Corporation, Gamseong Corporation, Hojun Silup, C&C International

[Asia Economy Reporter Lee Seon-ae] #If last year was a liquidity-driven market due to rapid liquidity expansion, this year is marked by notable stock price increases in sectors and stocks with clear earnings growth. With increased market volatility, a selective approach toward stocks with expected solid earnings growth in the second half of 2021 and 2022 is necessary. Daishin Securities identified promising sectors for the second half as ① parts and equipment within the secondary battery industry, which has high growth visibility beyond 2022, ② individual consumer goods with valuation appeal expected to show earnings growth in 2022, and ③ healthcare, where earnings growth is anticipated due to overseas expansion.

Consumer goods have been under adjustment due to concerns over the spread of the Delta variant virus, but consumer sentiment is likely to recover again with the transition to a with-COVID-19 system in the second half. In this environment, attention should be paid to consumer goods companies with individual growth momentum.

According to Daishin Securities on the 20th, domestic private consumption recorded increases of +1.2% and +3.6% quarter-on-quarter in the first and second quarters of this year, respectively, leading to a sharp rise in consumer goods stocks in the first quarter. However, following the spread of the COVID-19 Delta variant and concerns over a peak in consumption demand in the second half, adjustments have continued since mid-year. Even if growth slows somewhat in the third quarter due to strengthened social distancing measures from variant virus spread, the highest quarterly growth rate is expected in the fourth quarter if the quarantine system transitions to with-COVID-19 (our forecast for private consumption growth in Q3 and Q4 is +4.4% and +9.0%, respectively). Considering the trends for the second half and 2022, the current adjustment phase is judged to be a sufficient buying opportunity.

Domestic private consumption is expected to grow by 2.8% in 2022. Stable consumption recovery is anticipated despite high growth this year due to pent-up demand. Among consumer goods stocks, attention is needed for those that have not experienced significant stock price increases this year but show notable earnings growth in the second half and in 2022.

Researcher Han Kyung-rae of Daishin Securities stated, "We recommend Brand X Corporation, Gamseong Corporation, Hojun Industry, and C&C International as promising stocks for the second half."

Brand X Corporation owns Jessimix, a leading domestic leggings brand. Although profit growth was limited in the first and second quarters despite the economic reopening trend in the first half, from June onward, cost reductions in advertising and continuous new member growth are expected to drive high growth in both revenue and profit in the second half.

Gamseong Corporation launched the outdoor camping brand Snow Peak Apparel in February 2020. Rapid new store openings, growth in existing stores, and cost efficiency improvements are driving expansion centered on apparel. After turning profitable in the fourth quarter, it is expected to enter a full-scale profit recovery phase in 2022.

Hojun Industry is an OEM manufacturer of functional clothing and athleisure apparel. Major apparel OEM companies have recorded strong performance from increased orders due to pent-up demand since the first half. The third quarter, being a seasonal peak, is expected to show higher results compared to the first half. However, Hojun Industry recorded an operating loss in the first half due to production disruptions from COVID-19 and labor cost burdens in Indonesia but secured orders exceeding the combined sales of the first half in the third quarter. With new supply to the global athleisure brand Lululemon starting in August, earnings growth in 2022 is guaranteed.

C&C International is a point makeup manufacturer that has recorded higher profitability and revenue growth compared to competitors alongside the growth of domestic indie brands. Performance declined in the first half due to the impact of COVID-19 and proactive cost investments. In the second half, new supply to European prestige brands and the expansion of relatively higher-priced base makeup SKUs domestically are expected to be reflected. Domestic color makeup export data has been rebounding since bottoming out in July, and as the global market enters the early stages of with-COVID-19, demand recovery for color makeup is expected to accelerate.